Multiple coupon interest rate futures contracts

ABSTRACT

The disclosed system makes available multiple interest rate futures contracts (“IRFC”) for a given set of interest rate securities, such as US Treasury Notes, which may be used to satisfy the delivery obligation. The terms on which the delivery obligation of each such IRFC are met are governed by an associated conversion factor yield (“CFY”) value which is associated, in turn, with a corresponding set of conversion factors (“CF”), each of which corresponds to one member of the set of securities eligible for delivery, and which may be used at the time of delivery of such eligible interest rate security, to determine the delivery invoice price. Offering different CFY&#39;s and corresponding CF&#39;s may enable a market participant who seeks to use such futures to acquire or shed financial risk exposure to select from such array of futures contracts the member contract that most closely mirror the participant&#39;s intended risk profile.

BACKGROUND

Interest rate futures contracts, and in particular, Treasury futures,are contracts to sell or buy debt instruments, such as U.S. Treasurybonds or notes, at a future date. Anyone holding a position in anexpiring Treasury futures contract during its delivery month must beprepared to fulfill the contractual obligation to deliver, or to takedelivery of, the underlying deliverable grade Treasury securities,discussed in more detail below. For this reason, delivery on contract—orthe prospect of it—may be considered the chief determinant of prices atwhich Treasury futures trade.

Presently, the Treasury futures complex is neither intended nororganized to serve as a primary marketplace for the transfer ofownership of cash Treasury securities. Yet, the ever-present possibilityof transfer via physical delivery means that futures contract prices areinextricably linked to cash market prices. Thus, physical delivery intoTreasury futures may be considered, at once, infrequent yet pivotal.

Hedgers—those who use Treasury futures chiefly to lay off interest raterisk exposure rather than to acquire it—are seldom interested in usingfutures as a means of transacting Treasury securities. For this reason,hedgers typically liquidate their outstanding futures positions beforethe contracts enter their delivery cycle.

The majority of such liquidations are rolled. That is, the liquidatingtrades in the expiring contract are combined with trades that initiatecorresponding new positions in the next following (or “deferred”)contract delivery month. For example, a market participant with anoutstanding long position in an expiring futures contract would sell it,netting the position to zero. Simultaneously, the trader would establisha new long position in the deferred contract, equivalent in scale to theposition in the expiring contract that the trader has just liquidated.

The practice of rolling is prevalent. Accordingly, only a small share ofTreasury futures held by market participants may result in physicaldelivery—historically, around 3.6 percent. For the same reason, anexpiring Treasury futures contract's open interest tends to have shrunkby half by the time the contract's physical delivery cycle commences.

The terms and conditions for each Treasury futures contract specify itsdeliverable grade, i.e., the securities that a short position holder maydeliver at contract expiration for sale to a long position holder tofulfill the delivery obligation. These deliverable gradesecurities—Treasury notes and bonds—are debt instruments backed by thefull faith and credit of the U.S. government. Under the current rules,any Treasury security may be tendered for delivery, as long as it meetsthe futures contract's criteria for delivery suitability. Typically,several securities are eligible and, from one contract expiry to thenext, their number may vary with the frequency of issuance of notes andbonds by the U.S. Treasury.

For example, regarding Long Term U.S. Treasury Bond Futures, accordingto rule 40101.A. of the Chicago Board of Trade Rulebook, “[t]he contractgrade for delivery on futures made under these Rules shall be U.S.Treasury fixed principal bonds which have fixed semi-annual couponpayments, and which have a remaining term to maturity of at least 25years. For the purpose of determining a U.S. Treasury security'seligibility for contract grade, its remaining term to maturity shall becalculated from the first day of the contract's named month ofexpiration, and shall be rounded down to the nearest three-monthincrement (e.g., 12 years 5 months 18 days shall be taken to be 12 years3 months). New issues of U.S. Treasury securities that satisfy thestandards in this Rule shall be added to the contract grade as they areissued. Notwithstanding the foregoing, the Exchange shall have the rightto exclude any new issue from the contract grade or to further limitoutstanding issues from the contract grade.”

Further, with respect to Long Term U.S. Treasury Bond Futures, accordingto rule 40101.B. of the Chicago Board of Trade Rulebook, “[e]achindividual contract lot that is delivered must be composed of one andonly one contract grade Treasury bond issue. The amount at which theshort Clearing Member making delivery shall invoice the long ClearingMember taking delivery of said securities (Rule 40105.A.) shall bedetermined as:

Invoice Amount=($1000×P×c)+Accrued Interest

where

P is the contract daily settlement price on the day that the shortClearing Member gives the Clearing House notice of intention to deliver(Rule 40104.A.). P shall be expressed in points and fractions of pointswith par on the basis of 100 points (Rule 40102.C.); and

c is a conversion factor equal to the price at which a security with thesame time to maturity as said security (as per Rule 40101.A.), and withthe same coupon rate as said security, and with par on the basis of one(1) point, will yield 6% per annum according to conversion factor tablesprepared and published by the Exchange.

For each individual contract lot that is delivered, the productexpression ($1000×P×c) shall be rounded to the nearest cent, withhalf-cents rounded up to the nearest cent. Example: Assume that P is 100and 25/32nds. Assume that c is 0.9633. The product expression($1000×P×c) is found to be $97,082.578125. The rounded amount thatenters into determination of the Invoice Amount is $97,082.58. In thedetermination of the Invoice Amount for each individual contract lotbeing delivered, Accrued Interest shall be charged to the long ClearingMember taking delivery by the short Clearing Member making delivery, inaccordance with 31 CFR Part 306—General Regulations Governing U.S.Securities, Subpart E—Interest.”

Regarding short term U.S. Treasury Note Futures, according to rule21101.A. of the Chicago Board of Trade Rulebook, “[t]he contract gradefor delivery on futures made under these Rules shall be U.S. Treasuryfixed-principal notes which have fixed semi-annual coupon payments, andwhich have:

(a) an original term to maturity (i.e., term to maturity at issue) ofnot more than 5 years 3 months; and

(b) a remaining term to maturity of not more than 2 years; and

(c) a remaining term to maturity of not less than 1 year 9 months.

For the purpose of determining a U.S. Treasury note's eligibility forcontract grade, its remaining term to maturity shall be calculated fromthe first day of the contract's named month of expiration, and shall berounded down to the nearest one-month increment (e.g., 1 year 10 months17 days shall be taken to be 1 year 10 months). New issues of U.S.Treasury notes that satisfy the standards in this Rule shall be added tothe contract grade as they are issued. If the U.S. Treasury Departmentauctions and issues a Treasury security that meets these standards, suchthat said security is a re-opening of an extant Treasury issue that hadnot previously met these standards, then the extant Treasury issue shallbe deemed to be a Treasury note meeting these standards and shall beadded to the contract grade as of the issue date of said newly auctionedTreasury security. Notwithstanding the foregoing, the Exchange shallhave the right to exclude any new issue from the contract grade or tofurther limit outstanding issues from the contract grade.”

Further, with respect to short term U.S. Treasury Note Futures,according to rule 21101.B of the Chicago Board of Trade Rulebook,“[e]ach individual contract lot that is delivered must be composed ofone and only one contract grade Treasury note issue. The amount at whichthe short Clearing Member making delivery shall invoice the longClearing Member taking delivery of said notes (Rule 21105.A.) shall bedetermined as:

Invoice Amount=($2000×P×c)+Accrued Interest

where

P is the contract daily settlement price on the day that the shortClearing Member gives the Clearing House notice of intention to deliver(Rule 21104.A.). P shall be expressed in points and fractions of pointswith par on the basis of 100 points (Rule 21102.C.); and

c is a conversion factor equal to the price at which a note with thesame time to maturity as said note, and with the same coupon rate assaid note, and with par on the basis of one (1) point, will yield 6% perannum according to conversion factor tables prepared and published bythe Exchange.

For each individual contract lot that is delivered, the productexpression ($2000×P×c) shall be rounded to the nearest cent, withhalf-cents rounded up to the nearest cent. Example: Assume that P is 100and 25.5/32nds. Assume that c is 0.9633. The product expression($2000×P×c) is found to be $194,195.26259375. The rounded amount thatenters into determination of the Invoice Amount is $194,195.26. In thedetermination n of the Invoice Amount for each individual contract lotbeing delivered, Accrued Interest shall be charged to the long ClearingMember taking delivery by the short Clearing Member making delivery, inaccordance with 31 CFR Part 306—General Regulations Governing U.S.Securities, Subpart E—Interest.”

With respect to Treasury Note and Bond futures listed for trading on theChicago Board of Trade, updated U.S. Treasury Conversion Factors areperiodically published by the Exchange.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 depicts a table for an exemplary cheapest-to-deliver securityshowing values for different coupons.

FIG. 2 shows a block diagram of an exemplary system 200 for facilitatingsettlement of a trade of an interest rate futures contract.

FIG. 3 shows a flow chart depicting exemplary operation of the system200 of FIG. 2 for facilitating settlement of a trade of an interest ratefutures contract.

FIG. 4 shows an illustrative embodiment of a general computer system foruse with the exemplary system of FIG. 2.

DETAILED DESCRIPTION OF THE DRAWINGS AND PRESENTLY PREFERRED EMBODIMENTS

The disclosed embodiments relate to a system which makes availablemultiple interest rate futures contracts for a given set of interestrate securities, such as US Treasury Notes, which may be used to satisfythe delivery obligation. The terms on which the delivery obligation ofeach such interest rate futures contract are met are governed by anassociated conversion factor yield value. Each conversion factor yieldvalue is associated, in turn, with a corresponding set of conversionfactors, each of which corresponds to one member of the set ofsecurities eligible for delivery, and which may be used at the time ofdelivery of such eligible interest rate security, to determine thedelivery invoice price, i.e. the price paid in exchange for delivery.Because the conversion factor yield and the corresponding set ofconversion factors that apply to any one such interest rate futurescontract may be different from the values applicable to other suchfutures contracts, it follows that for any given array of such futurescontracts, any member of such array may differ from other members ofsuch array in terms of the location of its market price in relation tocontemporaneous market prices of the securities eligible for contractdelivery. The resultant variety of price levels, in relation to pricesof securities eligible for contract delivery, among the members of sucharray of multiple interest rate futures contracts may create beneficialflexibility for market participants, such that any market participantwho seeks to use such futures to acquire or shed financial risk exposuremay be enabled to select from such array of futures contracts the membercontract that most closely mirror the participant's intended riskprofile.

The disclosed embodiments further relate to mechanisms which allowtraders to participate in the definition of the equivalent securitiescharacterization of one or more of the interest rate futures contractsso as to ensure that desired products are made available withoutover-burdening the trading and clearing mechanisms of the Exchange whichfacilitates trading thereof. While the disclosed embodiments will bediscussed with respect to Treasury Notes and Treasury Futures contracts,it will be appreciated that the disclosed embodiments may be applicableto any futures contracts for any interest rate security now available orlater developed. Examples include, but are not limited to, contract forthe future sale and purchase of sovereign government securities issuedby the UK, Germany, France, Italy, Japan, or Spain; or securities issuedby government sponsored enterprises such as the Federal Home LoanMortgage Corporation, the Federal National Mortgage Association, or theFederal Home Loan Banks; or securities issued by supranationalorganizations such as the World Bank.

The rules which define the determination of the Treasury futuresdelivery invoice price for any instrument that qualifies to fulfill thedelivery obligation of the treasury future short position holder arereferred to as “the conversion factor (‘CF’) invoicing system.” The CFinvoicing system is designed to accommodate the delivery of a wide rangeof Treasury securities against the contract. E.g., Treasury securitieswith remaining maturities ranging from 6-12 to 10 years may be eligiblefor delivery vs. 10-Year T-note futures, and Treasury securities withremaining maturities of 25 years or longer may be eligible for deliveryvs. the Long-Term T-Bond futures contract. Thus, the short positionholder may elect to make delivery of any of a range of securities thatmay vary widely in terms of both coupon and maturity. Because securitieswith varying coupon and maturities command different value in themarket, the CF invoicing system is applied in an effort to normalize thevalue. The invoice price paid from long to short upon delivery ofsecurities is the product of the prevailing futures price and theconversion factor:

Invoice Amount=(Futures Price x Conversion Factor)+Accrued Interest (asexemplified above with respect to Long Term U.S. Treasury Bond Futuresand short term U.S. Treasury Note Futures). In addition to the principleinvoice amount, as determined by the product of the Futures Price andthe appropriate Conversion Factor, the long position holder is requiredto compensate the short position holder for interest accrued since thelast interest payment date for the security that is being tendered fordelivery in fulfillment of contract.

The CF associated with a particular security, for delivery into aparticular futures contract, may be calculated as the price of thesecurity, in view of its coupon and maturity, to yield 6% on the firstday of the futures contract delivery month. That 6% may be referred toas the “futures contract standard” or the conversion factor yield (“CFyield”) associated with the futures contract. The CF yield may beentirely arbitrary and may be generally established at levels that mayor may not be reflective of current market conditions. However,conditions do change. For example, Chicago Board of Trade (“CBOT”)Treasury futures may currently utilize a 6% contract standard, whereasprior to the year 2000 they utilized an 8% contract standard. Insofar asthe chief goal of the CF invoicing system is to render alldeliverable-grade securities for a given futures contract approximatelycomparable in terms of their economic suitability for use in makingdelivery, the CF yield that determines such conversion factors ideallywould equal the representative market yield among such deliverable-gradesecurities as of such futures contract's delivery month.

Ideally as well, application of the CF invoicing system would renderequally economic the delivery of any eligible security. Practically,however, a single security typically stands out as the cheapest or mosteconomic to deliver. As a general rule, when yields are in excess of the6% futures contract standard, the cheapest-to-deliver (“CTD”) securitieswill be long duration (long maturity, low coupon) securities incomparison to other deliverable grade securities. When yields are lessthan the 6% futures contract standard, the CTD security will tend to beshort duration (short maturity, high coupon) securities relative toother members of the contract grade. If market yields on securities thatare eligible for delivery into the futures contract happen to be at orvery close to the 6% futures contract standard, then these “conversionfactor biases” are (theoretically) muted, and potentially severaldeliverable-grade securities may be equally economic to deliver.

Futures contracts tend to price, i.e. track or correlate, most closelywith the CTD security. In a low yield environment, that implies thatfutures tend to price with reference to low duration securities, thatmay be considered to be the most seasoned of all of the futurescontracts deliverable-grade securities. However, market participants aretypically more interested in recently issued securities that areactively traded and that serve as the Treasury yield curve benchmarks.In this context, it will be appreciated that the “liquidity premium”associated with more recently auctioned Treasury securities tend todrive them to a price premium vs. seasoned securities.

The disclosed embodiments relate to multiple listings of Treasuryfutures contracts, with each contract subject to a distinct conversionfactor yield, based upon any particular “delivery window.” For example,one may develop multiple Long-Term T-Bond (“Ultra”) T-bond futurescontracts that call for the delivery of Treasuries with remaining termto maturity of 25 years or longer. For this set of contracts, inaddition to the current 6% CF yield Ultra T-bond futures, 4% and 2% CFyield futures contracts may also be considered, noting that 30-yearbonds currently yield in the vicinity of 3%. By offering Treasurycontracts, each carrying a different CF yield, that, for example,“straddle” current market yields, assurance may be achieved that somesuch contracts will track long-duration securities while others willtrack short-duration securities.

The table shown in FIG. 1 illustrates this point by identifying anexemplary CTD security associated with 6%, 4%, and 2% CF yield futurescontracts. This identification is accomplished by dividing the cashsecurity prices of all securities eligible for delivery vs. the Ultrafutures contract by their conversion factors. The CTD security isgenerally identified as the security with the lowest “adjusted futuresprice” (quoted in decimals). As shown in FIG. 1, predictably, the CTDsecurity vs. the current 6% CF yield Ultra futures contract is the 4-¾%of 2037. This is predictable because this security has a very lowduration of only 15.0 years while yields are less than the 6% futurescontract standard. But the CTD security vs. a hypothetical 2% couponfutures contract is the 3-⅞% if 2040. This is likewise predictable,noting its long duration of 16.7 years and the fact that prevailingyields are greater than the hypothetical 2% CF yield.

In an alternative embodiment, it may be further possible to list a zeroCF yield futures contract. Such a contract would have some interestingproperties that may be attractive to various market participants.Specifically, the effective duration of such contract would almostalways would reflect the duration of the of the deliverable gradesecurity with longest duration. For example, application of L'Hopital'sRule to the CF formula results in a 0% CF being simply 1 plus the sum ofthe security's coupon stream over its remaining term to maturity. E.g.,for a security with a coupon rate of 10 pct per annum and with 4 yearsof remaining term to maturity, the 0% CF is 1.4000, equal to 1+(4*0.1).If instead the security has 1 year 5 months of remaining term tomaturity, then the 0% CF is 1.1417, equal to 1+((1+5/12)*0.1).

In yet another exemplary embodiment, the Exchange may maintain contractswith CF yields that consistently straddle current yields by applying amethodology analogous to the listing of option strike prices.Specifically, the Exchange may identify a standard CF yield interval,e.g., 2%, 1%, 0.5%, etc. If market yields associated with securities ofa particular term to maturity should approach the highest or lowestcurrently listed CF yield level, a further futures contract with anotherCF yield could automatically be listed. For example, assume that the CFyield interval is established at 2% and that there are contractsavailable with CF yields at 2%, 4% and 6%. If market yields were toapproach 6%, a further contract could be listed with conversion factorsdetermined by a CF yield of 8%. Similarly, if market yields were toapproach 2%, a further contract with conversion factors determined by aCF yield of 0%. Offering multiple futures with various CF yield valuesprovides market participants with the option to utilize contracts (orcombinations thereof) for which cheapest-to-deliver (or CTD) status, asdiscussed above, may attach to different members of the ensemble ofsecurities that are eligible for delivery into such futures. Forexample, for a futures contract that is subject to a conversion factoryield that is low relative to market yields on the contract'sdeliverable-grade securities, the futures contract price would tend totrack the price dynamics of members of the deliverable grade withrelatively long duration. Conversely, for a futures contract that issubject to a conversion factor yield that is high relative to marketyields on securities eligible for contract delivery, the contract pricewould tend to the track the price dynamics of members of the contractdeliverable grade with relatively short durations This flexibility couldoffer significant opportunities in the context of risk management andbasis trading strategies and is further consistent with the trend tooffering customized products. While futures exchanges have typicallyattempted to offer standardized products that coalesce liquidity in asingle market, the hallmark of the over-the-counter derivative marketsis to provide the end user with significant flexibility, facilitated bythe availability of cheap computing power.

To clarify the use in the pending claims and to hereby provide notice tothe public, the phrases “at least one of <A>, <B>, . . . and <N>” or “atleast one of <A>, <B>, . . . <N>, or combinations thereof” are definedby the Applicant in the broadest sense, superseding any other implieddefinitions herebefore or hereinafter unless expressly asserted by theApplicant to the contrary, to mean one or more elements selected fromthe group comprising A, B, . . . and N, that is to say, any combinationof one or more of the elements A, B, . . . or N including any oneelement alone or in combination with one or more of the other elementswhich may also include, in combination, additional elements not listed.

FIG. 2 shows a block diagram of an exemplary system 200 for facilitatinglisting, trading and/or settlement of an interest rate futures contractthat specifies a delivery obligation, which may be satisfied by at leastthe delivery of any one or more of a set of eligible interest ratesecurities within a specified delivery period which may occur subsequentto the undertaking thereof. Each of the set of eligible interest ratesecurities may be characterized by an associated coupon and anassociated maturity which may be different from the coupon andmaturities associated with the others of the set of eligible interestrate securities. The system 200 may be operated by an Exchange, such asthe Chicago Board of Trade or the Chicago Mercantile Exchange, and maybe implemented, such as by logic stored in a memory or other tangiblecomputer readable medium and executable by a processor, in a computer,such as the computer 400 having a processor 402 and memory 404 discussedin more detail below. The system 200 includes an identificationprocessor 202, which may be implemented as logic stored in the memory404 and executable by the processor 402, operative to identify a set ofunique conversion factor yields, each of which is associated with a setof conversion factors, each conversion factor associated with adifferent interest rate security of the set of eligible interest ratesecurities, which may be used, at a specified time of delivery of aneligible interest rate security of the set of eligible interest ratesecurities specified by an interest rate futures contract, to compute aprice to be paid in exchange for the delivery thereof, the price beingcomputed based on the conversion factor associated therewith. In oneembodiment, the identification processor 202 is further operative toselect those unique conversion factor yields for inclusion in the set ofunique conversion factor yields which, for a particular marketcondition, a price dynamic of an associated interest rate futurescontract, as a function of the unique conversion factor yield,approximates a price dynamic of any of the set of eligible interest ratesecurities. Each conversion factor of the set of conversion factorsassociated with a particular conversion factor yield may be computed asa price at which a note with the same time to maturity as the associatedeligible interest rate security, and with par on the basis of one (1)point, will yield the associated conversion factor yield per annum.

The set of unique conversion factor yields may include all possibleconversion factors, a subset thereof selected by a plurality of traders,such as by voting, and/or a set of unique conversion factor yieldsselected by other means, such as based on prevailing, extrapolatedand/or predicted market conditions. It will be appreciated that whileall unique conversion factor yields may be utilized, the large number ofcontracts created thereby may impact performance of the trading systemand/or Exchange. Further, it will be appreciated that not all conversionfactor yields may be desirable by traders. Accordingly, in oneembodiment, the selection of the set of unique conversion factor yieldsis selective so as to reduce the computational and administrative loadon the trading system and may be based on market/trader demand, asevidenced for example by a popular vote by participating traders, byprevailing market conditions, such as the current yields of theunderlying interest rate securities, by predicted and/or extrapolatedmarket conditions, such as the predicted or extrapolated yields for theunderlying interest rate securities expected to be prevailing during thedelivery period(s), and/or by other mechanisms to select a set ofconversion factor yields. The identification processor 202 may furtherinclude logic to automatically select the set of unique conversionfactor yields as described and may further update the set, continuouslyor periodically, as the underlying bases therefore change. For example,where the particular market condition comprises an ensemble of marketyields to maturity, with one such yield applying to each member of theset of securities eligible for delivery into such futures contract ofthe selected interest rate security, the set of unique conversion factoryields may include a first conversion factor yield which is lower thanthe some or all of these market yields and a second conversion factoryield which is both higher than the first conversion factor yield andhigher than some or all of the market yields. The system 200 may furtherinclude a market monitoring processor 208 which is operative to monitorchanges in market conditions, such as via the Exchange 210, wherein theidentification 202 and listing processors 204, described below, arefurther coupled with the market monitoring processor 208 and furtheroperative to automatically identify the set of unique conversion factoryields and make the set of interest rate futures contracts availableresponsive to a change in market conditions.

The system 200 may also include a listing processor 204, which may alsobe implemented by logic stored in the memory 404 and executable by theprocessor 402, coupled with the identification processor 202 andoperative to make a set of interest rate futures contracts available fortrading, wherein each interest rate futures contract of the setspecifies a delivery obligation which may be satisfied by deliverywithin a specified delivery period, of any one or more of a set ofeligible interest rate securities, each interest rate futures contractof the set further characterized by one of the set of unique conversionfactor yields and associated set of conversion factors to be used, atthe time that the associated delivery obligation is satisfied, orsubstantially proximate thereto, at least by delivery and/or acceptanceof an eligible interest rate security, to compute the price to be paidupon satisfaction of the delivery obligation thereof. Herein, the phrase“coupled with” is defined to mean directly connected to or indirectlyconnected through one or more intermediate components. Such intermediatecomponents may include both hardware and software based components. Theinterest rate futures contracts may be communicated to the exchange 210via a network (not shown), such as the network 420 shown in FIG. 4, asone or more data packets comprising one or more parameters describing orotherwise defining the contract in a manner in which the Exchange canlist it for trading via an order book therefore.

The system 200 further includes a delivery processor 206, which may beimplemented by logic stored in the memory 404 and executable by theprocessor 402, coupled with the identification processor 204 andoperative, for a first trader having undertaken the specified deliveryobligation of a traded interest rate futures contract of the set ofinterest rate futures contracts and a second trader obliged to pay thecomputed price therefore, to apply, at the time of delivery orsubstantially proximate thereto, e.g. upon delivery and acceptance, theconversion factor, of the set of conversion factors associated with theconversion factor yield specified by the traded interest rate futurescontract, associated with an eligible interest rate security to bedelivered to compute the price to be paid to the first trader uponsatisfaction of the delivery obligation specified by the traded interestrate futures contract, the eligible interest rate security to bedelivered having been selected by one of the first trader, the secondtrader, or a combination thereof from the set of eligible interest ratesecurities specified by the traded interest rate futures contract. Itwill be appreciated that the value of the selected eligible interestrate security at the time the traded interest rate futures contact istraded may be different then the value of the selected eligible interestrate security at the time of delivery.

The delivery processor 206 may be coupled with a clearing house 212 ofthe Exchange 210 to facilitate the delivery process of the particularinterest rate security by transmitting, such as via the network 420,data indicative of the equivalent interest rate security(s) such thatthe clearing house 212 may determine that the obligated trader ismeeting their delivery obligation.

It will be appreciated that the one or more eligible interest ratesecurities selected by the trader to be delivered may not be the lowestcost interest rate security of the set of the eligible interest ratesecurities. For example, the trader may have other motivations besidescost for making their selection or they may be ignorant of the cost ofthe selected securities as compared to other eligible interest ratesecurities.

FIG. 3 shows a flow chart depicting exemplary operation of the system200 of FIG. 2 for facilitating listing, trading and settlement of aninterest rate futures contract that specifies a delivery obligation,which may be satisfied by at least the delivery, e.g. subsequent to theundertaking thereof, of any one or more of a set of eligible interestrate securities within a specified delivery period, the methodcomprising. The operation of the system 200 includes: identifying, by aprocessor, such as the processor 402, a set of unique conversion factoryields, each of which is associated with a set of conversion factors,each conversion factor associated with a different interest ratesecurity of the set of eligible interest rate securities, which may beused, at a specified time of delivery of an eligible interest ratesecurity of the set of eligible interest rate securities specified by aninterest rate futures contract, to compute a price to be paid inexchange for the delivery thereof, the price being computed based on theconversion factor associated therewith (block 302); making, by theprocessor, such as by the processor 402, a set of interest rate futurescontracts available for trading, wherein each interest rate futurescontract of the set specifies a delivery obligation which may besatisfied by delivery within a specified delivery period, of any of aset of eligible interest rate securities, each interest rate futurescontract of the set further characterized by one of the set of uniqueconversion factor yields and associated set of conversion factors to beused, at the time that the associated delivery obligation is satisfiedat least by delivery of an eligible interest rate security, to computethe price to be paid upon satisfaction of the delivery obligationthereof (block 304); and wherein for a first trader having undertakenthe specified delivery obligation of a traded interest rate futurescontract of the set of interest rate futures contracts and a secondtrader obliged to pay the computed price therefore, the operationfurther includes applying, by the processor, such as the processor 402,at the time of delivery, the conversion factor, of the set of conversionfactors associated with the conversion factor yield specified by thetraded interest rate futures contract, associated with an eligibleinterest rate security to be delivered to compute the price to be paidto the first trader upon satisfaction of the delivery obligationspecified by the traded interest rate futures contract, the eligible oneor more interest rate securities to be delivered having been selected byone of the first trader, the second trader, or a combination thereoffrom the set of eligible interest rate securities specified by thetraded interest rate futures contract (block 306).

As discussed above, the set of unique conversion factor yields mayinclude all possible conversion factors, a subset thereof selected by aplurality of traders, such as by voting, and/or a set of uniqueconversion factor yields selected by other means, such as based onprevailing, extrapolated and/or predicted market conditions. It will beappreciated that while all unique conversion factor yields may beutilized, the large number of contracts created thereby may impactperformance of the trading system and/or Exchange. Further, it will beappreciated that not all conversion factor yields may be desirable bytraders. Accordingly, in one embodiment, the selection of the set ofunique conversion factor yields is selective so as to reduce thecomputational and administrative load on the trading system and may bebased on market/trader demand, as evidenced for example by a popularvote by participating traders, by prevailing market conditions, such asthe current yields of the underlying interest rate securities, bypredicted and/or extrapolated market conditions, such as the predictedor extrapolated yields for the underlying interest rate securitiesexpected to be prevailing during the delivery period(s), and/or by othermechanisms to select a set of conversion factor yields. Theidentification processor 202 may further include logic to automaticallyselect the set of unique conversion factor yields as described and mayfurther update the set, continuously or periodically, as the underlyingbases therefore change. For example, where the particular marketcondition comprises an ensemble of market yields to maturity, with onesuch yield applying to each member of the set of securities eligible fordelivery into such futures contract of the selected interest ratesecurity, the set of unique conversion factor yields may include a firstconversion factor yield which is lower than the some or all of thesemarket yields and a second conversion factor yield which is both higherthan the first conversion factor yield and higher than some or all ofthe market yields. The operation of the system 200 may further includemonitoring, by the processor, such as the processor 402, changes inmarket conditions (block 308); and automatically performing, by theprocessor, such as by the processor 402, responsive to a change inmarket conditions, the identifying and making (block 310).

As discussed above, the one or more eligible interest rate securitiesselected by the trader to be delivered may not be the lowest costinterest rate security of the set of the eligible interest ratesecurities. For example, the trader may have other motivations besidescost for making their selection or they may be ignorant of the cost ofthe selected securities as compared to other eligible interest ratesecurities.

In one embodiment, the identifying may further include selecting thoseunique conversion factor yields for inclusion in the set of uniqueconversion factor yields which, for a particular market condition, aprice dynamic of an associated interest rate futures contract, as afunction of the unique conversion factor yield, approximates a pricedynamic of any of the set of eligible interest rate securities.

Each conversion factor of the set of conversion factors associated witha particular conversion factor yield may be computed as a price at whicha note with the same time to maturity as the associated eligibleinterest rate security, and with par on the basis of one (1) point, willyield the associated conversion factor yield per annum.

As discussed above, each of the set of eligible interest rate securitiesmay be characterized by an associated coupon and an associated maturitywhich may be different from the coupon and maturities associated withthe others of the set of eligible interest rate securities. Further, thevalue of the selected eligible interest rate security at the time thetraded interest rate futures contract is traded may be different thenthe value thereof at the time of the delivery.

Referring to FIG. 4, an illustrative embodiment of a general computersystem 400 is shown. The computer system 400 can include a set ofinstructions that can be executed to cause the computer system 400 toperform any one or more of the methods or computer based functionsdisclosed herein. The computer system 400 may operate as a standalonedevice or may be connected, e.g., using a network, to other computersystems or peripheral devices. Any of the components discussed above,such as the identification processor 202, listing processor 204,delivery processor 206 or market monitoring processor 208, may be acomputer system 400 or a component in the computer system 400. Thecomputer system 400 may implement a match engine 104 on behalf of anexchange, such as the Chicago Mercantile Exchange or Chicago Board ofTrade, of which the disclosed embodiments are a component thereof.

In a networked deployment, the computer system 400 may operate in thecapacity of a server or as a client user computer in a client-serveruser network environment, or as a peer computer system in a peer-to-peer(or distributed) network environment. The computer system 400 can alsobe implemented as or incorporated into various devices, such as apersonal computer (PC), a tablet PC, a set-top box (STB), a personaldigital assistant (PDA), a mobile device, a palmtop computer, a laptopcomputer, a desktop computer, a communications device, a wirelesstelephone, a land-line telephone, a control system, a camera, a scanner,a facsimile machine, a printer, a pager, a personal trusted device, aweb appliance, a network router, switch or bridge, or any other machinecapable of executing a set of instructions (sequential or otherwise)that specify actions to be taken by that machine In a particularembodiment, the computer system 400 can be implemented using electronicdevices that provide voice, video or data communication. Further, whilea single computer system 400 is illustrated, the term “system” shallalso be taken to include any collection of systems or sub-systems thatindividually or jointly execute a set, or multiple sets, of instructionsto perform one or more computer functions.

As illustrated in FIG. 4, the computer system 400 may include aprocessor 402, e.g., a central processing unit (CPU), a graphicsprocessing unit (GPU), or both. The processor 402 may be a component ina variety of systems. For example, the processor 402 may be part of astandard personal computer or a workstation. The processor 402 may beone or more general processors, digital signal processors, applicationspecific integrated circuits, field programmable gate arrays, servers,networks, digital circuits, analog circuits, combinations thereof, orother now known or later developed devices for analyzing and processingdata. The processor 402 may implement a software program, such as codegenerated manually (i.e., programmed).

The computer system 400 may include a memory 404 that can communicatevia a bus 408. The memory 404 may be a main memory, a static memory, ora dynamic memory. The memory 404 may include, but is not limited tocomputer readable storage media such as various types of volatile andnon-volatile storage media, including but not limited to random accessmemory, read-only memory, programmable read-only memory, electricallyprogrammable read-only memory, electrically erasable read-only memory,flash memory, magnetic tape or disk, optical media and the like. In oneembodiment, the memory 404 includes a cache or random access memory forthe processor 402. In alternative embodiments, the memory 404 isseparate from the processor 402, such as a cache memory of a processor,the system memory, or other memory. The memory 404 may be an externalstorage device or database for storing data. Examples include a harddrive, compact disc (“CD”), digital video disc (“DVD”), memory card,memory stick, floppy disc, universal serial bus (“USB”) memory device,or any other device operative to store data. The memory 404 is operableto store instructions executable by the processor 402. The functions,acts or tasks illustrated in the figures or described herein may beperformed by the programmed processor 402 executing the instructions 412stored in the memory 404. The functions, acts or tasks are independentof the particular type of instructions set, storage media, processor orprocessing strategy and may be performed by software, hardware,integrated circuits, firm-ware, micro-code and the like, operating aloneor in combination. Likewise, processing strategies may includemultiprocessing, multitasking, parallel processing and the like.

As shown, the computer system 400 may further include a display unit414, such as a liquid crystal display (LCD), an organic light emittingdiode (OLED), a flat panel display, a solid state display, a cathode raytube (CRT), a projector, a printer or other now known or later developeddisplay device for outputting determined information. The display 414may act as an interface for the user to see the functioning of theprocessor 402, or specifically as an interface with the software storedin the memory 404 or in the drive unit 406.

Additionally, the computer system 400 may include an input device 416configured to allow a user to interact with any of the components ofsystem 400. The input device 416 may be a number pad, a keyboard, or acursor control device, such as a mouse, or a joystick, touch screendisplay, remote control or any other device operative to interact withthe system 400.

In a particular embodiment, as depicted in FIG. 4, the computer system400 may also include a disk or optical drive unit 406. The disk driveunit 406 may include a computer-readable medium 410 in which one or moresets of instructions 412, e.g. software, can be embedded. Further, theinstructions 412 may embody one or more of the methods or logic asdescribed herein. In a particular embodiment, the instructions 412 mayreside completely, or at least partially, within the memory 404 and/orwithin the processor 402 during execution by the computer system 400.The memory 404 and the processor 402 also may include computer-readablemedia as discussed above.

The present disclosure contemplates a computer-readable medium thatincludes instructions 412 or receives and executes instructions 412responsive to a propagated signal, so that a device connected to anetwork 420 can communicate voice, video, audio, images or any otherdata over the network 420. Further, the instructions 412 may betransmitted or received over the network 420 via a communicationinterface 418. The communication interface 418 may be a part of theprocessor 402 or may be a separate component. The communicationinterface 418 may be created in software or may be a physical connectionin hardware. The communication interface 418 is configured to connectwith a network 420, external media, the display 414, or any othercomponents in system 400, or combinations thereof. The connection withthe network 420 may be a physical connection, such as a wired Ethernetconnection or may be established wirelessly as discussed below.Likewise, the additional connections with other components of the system400 may be physical connections or may be established wirelessly.

The network 420 may include wired networks, wireless networks, orcombinations thereof. The wireless network may be a cellular telephonenetwork, an 802.11, 802.16, 802.20, or WiMax network. Further, thenetwork 420 may be a public network, such as the Internet, a privatenetwork, such as an intranet, or combinations thereof, and may utilize avariety of networking protocols now available or later developedincluding, but not limited to TCP/IP based networking protocols.

Embodiments of the subject matter and the functional operationsdescribed in this specification can be implemented in digital electroniccircuitry, or in computer software, firmware, or hardware, including thestructures disclosed in this specification and their structuralequivalents, or in combinations of one or more of them. Embodiments ofthe subject matter described in this specification can be implemented asone or more computer program products, i.e., one or more modules ofcomputer program instructions encoded on a computer readable medium forexecution by, or to control the operation of, data processing apparatus.While the computer-readable medium is shown to be a single medium, theterm “computer-readable medium” includes a single medium or multiplemedia, such as a centralized or distributed database, and/or associatedcaches and servers that store one or more sets of instructions. The term“computer-readable medium” shall also include any medium that is capableof storing, encoding or carrying a set of instructions for execution bya processor or that cause a computer system to perform any one or moreof the methods or operations disclosed herein. The computer readablemedium can be a machine-readable storage device, a machine-readablestorage substrate, a memory device, or a combination of one or more ofthem. The term “data processing apparatus” encompasses all apparatus,devices, and machines for processing data, including by way of example aprogrammable processor, a computer, or multiple processors or computers.The apparatus can include, in addition to hardware, code that creates anexecution environment for the computer program in question, e.g., codethat constitutes processor firmware, a protocol stack, a databasemanagement system, an operating system, or a combination of one or moreof them.

In a particular non-limiting, exemplary embodiment, thecomputer-readable medium can include a solid-state memory such as amemory card or other package that houses one or more non-volatileread-only memories. Further, the computer-readable medium can be arandom access memory or other volatile re-writable memory. Additionally,the computer-readable medium can include a magneto-optical or opticalmedium, such as a disk or tapes or other storage device to capturecarrier wave signals such as a signal communicated over a transmissionmedium. A digital file attachment to an e-mail or other self-containedinformation archive or set of archives may be considered a distributionmedium that is a tangible storage medium. Accordingly, the disclosure isconsidered to include any one or more of a computer-readable medium or adistribution medium and other equivalents and successor media, in whichdata or instructions may be stored.

In an alternative embodiment, dedicated hardware implementations, suchas application specific integrated circuits, programmable logic arraysand other hardware devices, can be constructed to implement one or moreof the methods described herein. Applications that may include theapparatus and systems of various embodiments can broadly include avariety of electronic and computer systems. One or more embodimentsdescribed herein may implement functions using two or more specificinterconnected hardware modules or devices with related control and datasignals that can be communicated between and through the modules, or asportions of an application-specific integrated circuit. Accordingly, thepresent system encompasses software, firmware, and hardwareimplementations.

In accordance with various embodiments of the present disclosure, themethods described herein may be implemented by software programsexecutable by a computer system. Further, in an exemplary, non-limitedembodiment, implementations can include distributed processing,component/object distributed processing, and parallel processing.Alternatively, virtual computer system processing can be constructed toimplement one or more of the methods or functionality as describedherein.

Although the present specification describes components and functionsthat may be implemented in particular embodiments with reference toparticular standards and protocols, the invention is not limited to suchstandards and protocols. For example, standards for Internet and otherpacket switched network transmission (e.g., TCP/IP, UDP/IP, HTML, HTTP,HTTPS) represent examples of the state of the art. Such standards areperiodically superseded by faster or more efficient equivalents havingessentially the same functions. Accordingly, replacement standards andprotocols having the same or similar functions as those disclosed hereinare considered equivalents thereof.

A computer program (also known as a program, software, softwareapplication, script, or code) can be written in any form of programminglanguage, including compiled or interpreted languages, and it can bedeployed in any form, including as a standalone program or as a module,component, subroutine, or other unit suitable for use in a computingenvironment. A computer program does not necessarily correspond to afile in a file system. A program can be stored in a portion of a filethat holds other programs or data (e.g., one or more scripts stored in amarkup language document), in a single file dedicated to the program inquestion, or in multiple coordinated files (e.g., files that store oneor more modules, sub programs, or portions of code). A computer programcan be deployed to be executed on one computer or on multiple computersthat are located at one site or distributed across multiple sites andinterconnected by a communication network.

The processes and logic flows described in this specification can beperformed by one or more programmable processors executing one or morecomputer programs to perform functions by operating on input data andgenerating output. The processes and logic flows can also be performedby, and apparatus can also be implemented as, special purpose logiccircuitry, e.g., an FPGA (field programmable gate array) or an ASIC(application specific integrated circuit).

Processors suitable for the execution of a computer program include, byway of example, both general and special purpose microprocessors, andanyone or more processors of any kind of digital computer. Generally, aprocessor will receive instructions and data from a read only memory ora random access memory or both. The essential elements of a computer area processor for performing instructions and one or more memory devicesfor storing instructions and data. Generally, a computer will alsoinclude, or be operatively coupled to receive data from or transfer datato, or both, one or more mass storage devices for storing data, e.g.,magnetic, magneto optical disks, or optical disks. However, a computerneed not have such devices. Moreover, a computer can be embedded inanother device, e.g., a mobile telephone, a personal digital assistant(PDA), a mobile audio player, a Global Positioning System (GPS)receiver, to name just a few. Computer readable media suitable forstoring computer program instructions and data include all forms of nonvolatile memory, media and memory devices, including by way of examplesemiconductor memory devices, e.g., EPROM, EEPROM, and flash memorydevices; magnetic disks, e.g., internal hard disks or removable disks;magneto optical disks; and CD ROM and DVD-ROM disks. The processor andthe memory can be supplemented by, or incorporated in, special purposelogic circuitry.

To provide for interaction with a user, embodiments of the subjectmatter described in this specification can be implemented on a devicehaving a display, e.g., a CRT (cathode ray tube) or LCD (liquid crystaldisplay) monitor, for displaying information to the user and a keyboardand a pointing device, e.g., a mouse or a trackball, by which the usercan provide input to the computer. Other kinds of devices can be used toprovide for interaction with a user as well; for example, feedbackprovided to the user can be any form of sensory feedback, e.g., visualfeedback, auditory feedback, or tactile feedback; and input from theuser can be received in any form, including acoustic, speech, or tactileinput.

Embodiments of the subject matter described in this specification can beimplemented in a computing system that includes a back end component,e.g., as a data server, or that includes a middleware component, e.g.,an application server, or that includes a front end component, e.g., aclient computer having a graphical user interface or a Web browserthrough which a user can interact with an implementation of the subjectmatter described in this specification, or any combination of one ormore such back end, middleware, or front end components. The componentsof the system can be interconnected by any form or medium of digitaldata communication, e.g., a communication network. Examples ofcommunication networks include a local area network (“LAN”) and a widearea network (“WAN”), e.g., the Internet.

The computing system can include clients and servers. A client andserver are generally remote from each other and typically interactthrough a communication network. The relationship of client and serverarises by virtue of computer programs running on the respectivecomputers and having a client-server relationship to each other.

The illustrations of the embodiments described herein are intended toprovide a general understanding of the structure of the variousembodiments. The illustrations are not intended to serve as a completedescription of all of the elements and features of apparatus and systemsthat utilize the structures or methods described herein. Many otherembodiments may be apparent to those of skill in the art upon reviewingthe disclosure. Other embodiments may be utilized and derived from thedisclosure, such that structural and logical substitutions and changesmay be made without departing from the scope of the disclosure.Additionally, the illustrations are merely representational and may notbe drawn to scale. Certain proportions within the illustrations may beexaggerated, while other proportions may be minimized. Accordingly, thedisclosure and the figures are to be regarded as illustrative ratherthan restrictive.

While this specification contains many specifics, these should not beconstrued as limitations on the scope of the invention or of what may beclaimed, but rather as descriptions of features specific to particularembodiments of the invention. Certain features that are described inthis specification in the context of separate embodiments can also beimplemented in combination in a single embodiment. Conversely, variousfeatures that are described in the context of a single embodiment canalso be implemented in multiple embodiments separately or in anysuitable sub-combination. Moreover, although features may be describedabove as acting in certain combinations and even initially claimed assuch, one or more features from a claimed combination can in some casesbe excised from the combination, and the claimed combination may bedirected to a sub-combination or variation of a sub-combination.

Similarly, while operations are depicted in the drawings and describedherein in a particular order, this should not be understood as requiringthat such operations be performed in the particular order shown or insequential order, or that all illustrated operations be performed, toachieve desirable results. In certain circumstances, multitasking andparallel processing may be advantageous. Moreover, the separation ofvarious system components in the embodiments described above should notbe understood as requiring such separation in all embodiments, and itshould be understood that the described program components and systemscan generally be integrated together in a single software product orpackaged into multiple software products.

One or more embodiments of the disclosure may be referred to herein,individually and/or collectively, by the term “invention” merely forconvenience and without intending to voluntarily limit the scope of thisapplication to any particular invention or inventive concept. Moreover,although specific embodiments have been illustrated and describedherein, it should be appreciated that any subsequent arrangementdesigned to achieve the same or similar purpose may be substituted forthe specific embodiments shown. This disclosure is intended to cover anyand all subsequent adaptations or variations of various embodiments.Combinations of the above embodiments, and other embodiments notspecifically described herein, will be apparent to those of skill in theart upon reviewing the description.

The Abstract of the Disclosure is provided to comply with 37 C.F.R.§1.72(b) and is submitted with the understanding that it will not beused to interpret or limit the scope or meaning of the claims. Inaddition, in the foregoing Detailed Description, various features may begrouped together or described in a single embodiment for the purpose ofstreamlining the disclosure. This disclosure is not to be interpreted asreflecting an intention that the claimed embodiments require morefeatures than are expressly recited in each claim. Rather, as thefollowing claims reflect, inventive subject matter may be directed toless than all of the features of any of the disclosed embodiments. Thus,the following claims are incorporated into the Detailed Description,with each claim standing on its own as defining separately claimedsubject matter.

It is therefore intended that the foregoing detailed description beregarded as illustrative rather than limiting, and that it be understoodthat it is the following claims, including all equivalents, that areintended to define the spirit and scope of this invention.

We claim:
 1. A computer implemented method of facilitating listing,trading and settlement of an interest rate futures contract thatspecifies a delivery obligation, which may be satisfied by at least thedelivery of any of a set of eligible interest rate securities within aspecified delivery period, the method comprising: identifying, by aprocessor, a set of unique conversion factor yields, each of which isassociated with a set of conversion factors, each conversion factorassociated with a different interest rate security of the set ofeligible interest rate securities, which may be used, at a specifiedtime of delivery of an eligible interest rate security of the set ofeligible interest rate securities specified by an interest rate futurescontract, to compute a price to be paid in exchange for the deliverythereof, the price being computed based on the conversion factorassociated therewith; making, by the processor, a set of interest ratefutures contracts available for trading, wherein each interest ratefutures contract of the set specifies a delivery obligation which may besatisfied by delivery within a specified delivery period, of any of aset of eligible interest rate securities, each interest rate futurescontract of the set further characterized by one of the set of uniqueconversion factor yields and associated set of conversion factors to beused, at the time that the associated delivery obligation is satisfiedat least by delivery of an eligible interest rate security, to computethe price to be paid upon satisfaction of the delivery obligationthereof; and wherein for a first trader having undertaken the specifieddelivery obligation of a traded interest rate futures contract of theset of interest rate futures contracts and a second trader obliged topay the computed price therefore, the method further includes: applying,by the processor, at the time of delivery, the conversion factor, of theset of conversion factors associated with the conversion factor yieldspecified by the traded interest rate futures contract, associated withan eligible interest rate security to be delivered to compute the priceto be paid to the first trader upon satisfaction of the deliveryobligation specified by the traded interest rate futures contract, theeligible interest rate security to be delivered having been selected byone of the first trader, the second trader, or a combination thereoffrom the set of eligible interest rate securities specified by thetraded interest rate futures contract.
 2. The computer implementedmethod of claim 1 wherein the identifying further comprises selectingthose unique conversion factor yields for inclusion in the set of uniqueconversion factor yields which, for a particular market condition, aprice dynamic of an associated interest rate futures contract, as afunction of the unique conversion factor yield, approximates a pricedynamic of any of the set of eligible interest rate securities.
 3. Thecomputer implemented method of claim 1 wherein the eligible interestrate security selected by the first trader, the second trader or acombination thereof, to be delivered is not the lowest cost interestrate security of the set of the eligible interest rate securities. 4.The computer implemented method of claim 1 wherein the trader may selectmore than one interest rate security to deliver in satisfaction of thedelivery obligation.
 5. The computer implemented method of claim 1wherein each conversion factor of the set of conversion factorsassociated with a conversion factor yield is computed as a price atwhich a note with the same time to maturity as the associated eligibleinterest rate security, and with par on the basis of one (1) point, willyield the associated conversion factor yield per annum.
 6. The computerimplemented method of claim 1 wherein the specified delivery periodoccurs subsequent to the undertaking of the specified deliveryobligation by the first trader.
 7. The computer implemented method ofclaim 1 wherein each of the set of eligible interest rate securities ischaracterized by an associated coupon and an associated maturity.
 8. Thecomputer implemented method of claim 7 wherein the coupon and maturityassociated with the selected eligible interest rate security may bedifferent from the coupon and maturities associated with the others ofthe set of eligible interest rate securities.
 9. The computerimplemented method of claim 7 wherein the value of the selected eligibleinterest rate security at the time the traded interest rate futurescontract is traded may be different then the value thereof at the timeof the delivery.
 10. The computer implemented method of claim 1 whereinthe particular market condition at a time of the making comprises ayield of the selected eligible interest rate security, the set of uniqueconversion factor yields including a first conversion factor yield lowerthan the yield of the selected eligible interest rate security and asecond conversion factor yield higher than the yield of the selectedeligible interest rate security.
 11. The computer implemented method ofclaim 10 further comprising: monitoring, by the processor, changes inmarket conditions; and automatically performing, by the processorresponsive to a change in market conditions, the identifying and making.12. The computer implemented method of claim 1 wherein the set of uniqueconversion factor yields comprises all possible conversion factoryields.
 13. The computer implemented method of claim 12 wherein the setof unique conversion factor yields comprises conversion factor yieldsselected by a plurality of traders.
 14. The computer implemented methodof claim 13 wherein the selection of the set of unique conversion factoryields is accomplished by voting among the plurality of traders.
 15. Asystem for facilitating listing, trading and settlement of an interestrate futures contract that specifies a delivery obligation, which may besatisfied by at least the delivery of any of a set of eligible interestrate securities within a specified delivery period, the systemcomprising: an identification processor operative to identify a set ofunique conversion factor yields, each of which is associated with a setof conversion factors, each conversion factor associated with adifferent interest rate security of the set of eligible interest ratesecurities, which may be used, at a specified time of delivery of aneligible interest rate security of the set of eligible interest ratesecurities specified by an interest rate futures contract, to compute aprice to be paid in exchange for the delivery thereof, the price beingcomputed based on the conversion factor associated therewith; a listingprocessor coupled with the identification processor and operative tomake a set of interest rate futures contracts available for trading,wherein each interest rate futures contract of the set specifies adelivery obligation which may be satisfied by delivery within aspecified delivery period, of any of a set of eligible interest ratesecurities, each interest rate futures contract of the set furthercharacterized by one of the set of unique conversion factor yields andassociated set of conversion factors to be used, at the time that theassociated delivery obligation is satisfied at least by delivery of aneligible interest rate security, to compute the price to be paid uponsatisfaction of the delivery obligation thereof; and a deliveryprocessor coupled with the identification processor and operative, for afirst trader having undertaken the specified delivery obligation of atraded interest rate futures contract of the set of interest ratefutures contracts and a second trader obliged to pay the computed pricetherefore, to apply, at the time of delivery, the conversion factor, ofthe set of conversion factors associated with the conversion factoryield specified by the traded interest rate futures contract, associatedwith an eligible interest rate security to be delivered to compute theprice to be paid to the first trader upon satisfaction of the deliveryobligation specified by the traded interest rate futures contract, theeligible interest rate security to be delivered having been selected byone of the first trader, the second trader, or a combination thereoffrom the set of eligible interest rate securities specified by thetraded interest rate futures contract.
 16. The system of claim 15wherein the identification processor is further operative to selectthose unique conversion factor yields for inclusion in the set of uniqueconversion factor yields which, for a particular market condition, aprice dynamic of an associated interest rate futures contract, as afunction of the unique conversion factor yield, approximates a pricedynamic of any of the set of eligible interest rate securities.
 17. Thesystem of claim 15 wherein the eligible interest rate security selectedby the first trader, the second trader, or a combination thereof, to bedelivered is not the lowest cost interest rate security of the set ofthe eligible interest rate securities.
 18. The system of claim 15wherein the trader may select more than one interest rate security todeliver in satisfaction of the delivery obligation.
 19. The system ofclaim 15 wherein each conversion factor of the set of conversion factorsassociated with a conversion factor yield is computed as a price atwhich a note with the same time to maturity as the associated eligibleinterest rate security, and with par on the basis of one (1) point, willyield the associated conversion factor yield per annum.
 20. The systemof claim 15 wherein the specified delivery period occurs subsequent tothe undertaking of the specified delivery obligation by the firsttrader.
 21. The system of claim 15 wherein each of the set of eligibleinterest rate securities is characterized by an associated coupon and anassociated maturity.
 22. The system of claim 21 wherein the coupon andmaturity associated with the selected eligible interest rate securitymay be different from the coupon and maturities associated with theothers of the set of eligible interest rate securities.
 23. The systemof claim 21 wherein the value of the selected eligible interest ratesecurity at the time the traded interest rate futures contact is tradedmay be different then the value of the selected eligible interest ratesecurity at the time of delivery.
 24. The system of claim 15 wherein theparticular market condition comprises a yield of the selected eligibleinterest rate security, the set of unique conversion factor yieldsincluding a first conversion factor yield lower than the yield of theselected eligible interest rate security and a second conversion factoryield which is higher than the yield of the selected eligible interestrate security.
 25. The system of claim 24 further comprising: a marketmonitoring processor operative to monitor changes in market conditions;and wherein the identification and listing processors are furthercoupled with the market monitoring processor and further operative toautomatically identify the set of unique conversion factor yields andmake the set of interest rate futures contracts available responsive toa change in market conditions.
 26. The system of claim 15 wherein theset of unique conversion factor yields comprises all possible conversionfactor yields.
 27. The system of claim 26 wherein the set of uniqueconversion factor yields comprises conversion factor yields selected bya plurality of traders.
 28. The system of claim 27 wherein the selectionof the set of unique conversion factor yields is accomplished by votingamong the plurality of traders.
 29. A system for facilitating listing,trading and settlement of an interest rate futures contract thatspecifies a delivery obligation, which may be satisfied by at least thedelivery of any of a set of eligible interest rate securities within aspecified delivery period, the system comprising a processor and amemory coupled therewith, the system further comprising: first logicstored in the memory and executable by the processor to identify a setof unique conversion factor yields, each of which is associated with aset of conversion factors, each conversion factor associated with adifferent interest rate security of the set of eligible interest ratesecurities, which may be used, at a specified time of delivery of aneligible interest rate security of the set of eligible interest ratesecurities specified by an interest rate futures contract, to compute aprice to be paid in exchange for the delivery thereof, the price beingcomputed based on the conversion factor associated therewith; secondlogic stored in the memory and executable by the processor to make a setof interest rate futures contracts available for trading, wherein eachinterest rate futures contract of the set specifies a deliveryobligation which may be satisfied by delivery within a specifieddelivery period, of any of a set of eligible interest rate securities,each interest rate futures contract of the set further characterized byone of the set of unique conversion factor yields and associated set ofconversion factors to be used, at the time that the associated deliveryobligation is satisfied at least by delivery of an eligible interestrate security, to compute the price to be paid upon satisfaction of thedelivery obligation thereof; and third logic stored in the memory andexecutable by the processor, for a first trader having undertaken thespecified delivery obligation of a traded interest rate futures contractof the set of interest rate futures contracts and a second traderobliged to pay the computed price therefore, to apply, at the time ofdelivery, the conversion factor, of the set of conversion factorsassociated with the conversion factor yield specified by the tradedinterest rate futures contract, associated with an eligible interestrate security to be delivered to compute the price to be paid to thefirst trader upon satisfaction of the delivery obligation specified bythe traded interest rate futures contract, the eligible interest ratesecurity to be delivered having been selected by one of the firsttrader, the second trader, or a combination thereof from the set ofeligible interest rate securities specified by the traded interest ratefutures contract.
 30. A system for facilitating listing, trading andsettlement of an interest rate futures contract that specifies adelivery obligation, which may be satisfied by at least the delivery ofany of a set of eligible interest rate securities within a specifieddelivery period, the system comprising: means for identifying a set ofunique conversion factor yields, each of which is associated with a setof conversion factors, each conversion factor associated with adifferent interest rate security of the set of eligible interest ratesecurities, which may be used, at a specified time of delivery of aneligible interest rate security of the set of eligible interest ratesecurities specified by an interest rate futures contract, to compute aprice to be paid in exchange for the delivery thereof, the price beingcomputed based on the conversion factor associated therewith; means formaking a set of interest rate futures contracts available for trading,wherein each interest rate futures contract of the set specifies adelivery obligation which may be satisfied by delivery within aspecified delivery period, of any of a set of eligible interest ratesecurities, each interest rate futures contract of the set furthercharacterized by one of the set of unique conversion factor yields andassociated set of conversion factors to be used, at the time that theassociated delivery obligation is satisfied at least by delivery of aneligible interest rate security, to compute the price to be paid uponsatisfaction of the delivery obligation thereof; and wherein for a firsttrader having undertaken the specified delivery obligation of a tradedinterest rate futures contract of the set of interest rate futurescontracts and a second trader obliged to pay the computed pricetherefore, the system further includes: means for applying at the timeof delivery, the conversion factor, of the set of conversion factorsassociated with the conversion factor yield specified by the tradedinterest rate futures contract, associated with an eligible interestrate security to be delivered to compute the price to be paid to thefirst trader upon satisfaction of the delivery obligation specified bythe traded interest rate futures contract, the eligible interest ratesecurity to be delivered having been selected by one of the firsttrader, the second trader, or a combination thereof from the set ofeligible interest rate securities specified by the traded interest ratefutures contract.